Just Trading and Just Investment in Africa after Brexit
Updated: Oct 8, 2018
Barry Gardiner MP outlines the Labour Party's policy for trade and investment with Africa at a fringe meeting hosted by the All-Party Parliamentary Group on Trade Out of Poverty and the Overseas Development Institute, Brighton, 25 September 2017.
Many thanks for inviting me to speak at this most timely fringe. I’m very grateful to the All-Party Parliamentary Group on Trade Out of Poverty for hosting this debate, and I’d also like to pay tribute to the important research done at the ODI into the nexus between trade, investment and development. We make good use of your material, I can assure you.
This is a historic moment for the UK’s commercial relations with our trading partners around the world. For the first time in 40 years, the UK is taking back responsibility for determining our own trade policy.
We are expecting to see the government’s thinking in its White Paper on International Trade any day now – something I’ve been calling on Liam Fox to produce since last November. Even Donald Trump managed to get his trade policy out within seven weeks of taking office!
And then at some unspecified time this autumn, the government will present its Trade and Customs Bills before parliament. This will be a critical moment, as those two bills will establish the legislative framework under which our future trade policy is to operate.
Labour will fight to ensure that proper parliamentary scrutiny is built in to the process, so that we aren’t faced with the chilling prospect of a Conservative government going off and doing its own thing on trade, free from democratic oversight.
So watch this space – you’re about to hear a lot more public debate about international trade in the coming few weeks!
Turning to our specific theme here this afternoon, Labour is fully committed to addressing the historical development needs of the world’s most vulnerable countries in its trade and investment policy, and that includes many of the countries of Africa.
This means working to secure market access for African exports under at least the same terms they have enjoyed while the UK has been part of the EU.
First and foremost, we need to maintain duty-free and quota-free access for exports from the world’s least developed countries (the LDCs). This is clearly a major issue for Africa. Even after Equatorial Guinea graduated from their ranks this summer, the majority of the remaining 47 LDCs are from sub-Saharan Africa, and many will continue to be so for the foreseeable future.
Providing these countries with duty-free and quota-free access to the UK market is one of our obligations under the Sustainable Development Goals, and Labour was proud to include this as a pledge in our general election manifesto.
I’m happy to say that the Conservative government announced shortly after the election that it would also be adopting Labour’s policy. It’s not the first time they’ve looked to us for a steer on trade, and I’m sure it won’t be the last.
But we need to go beyond just the LDCs. In absolute terms, it is non-LDC African countries such as Ghana, Kenya, Mauritius, South Africa and Nigeria that have more to lose from a change in their terms of trade post-Brexit.
For those countries that are covered by the EU’s Generalised System of Preferences, we will seek to develop our own GSP scheme so that they do not face a loss of market access post-Brexit.
I would welcome further dialogue with the ODI and other partners on this, as there are differing opinions on how best to do it.
Do we just roll over the EU’s GSP scheme, warts and all, given that this will offer the most continuity and predictability? Or should we try to improve on the EU system, in collaboration with those exporters who have first-hand experience of how it works?
For instance, some say we should abandon the EU’s conditional GSP+ scheme, which offers enhanced preferences to those countries that have signed up to the 27 core conventions on human rights, labour rights and environmental protection.
If we were just developing that policy in relation to African countries, it might not be much of an issue. Cape Verde is the only GSP+ African economy at present, and the UK doesn’t feature among its main export markets.
But looking beyond Africa, what will it mean for producers in Pakistan if they suddenly find their terms of access to the UK market hit by a removal of GSP+ preferences? These are real life considerations that go beyond academic theories.
More problematic yet, what about the reciprocal agreements that we will inherit from the EU? You don’t need me to tell you how controversial the EU’s Economic Partnership Agreements have been. Governments and civil society movements across Africa have railed against them for years as yet another attempt to force open their markets for the benefit of external operators.
So much damage was done to the economies of Africa in the 1980s and ‘90s as a result of being made to open up their markets under the structural adjustment programmes of the World Bank and IMF. Those policies led to such widespread deindustrialisation, unemployment and poverty that even the IMF later admitted it had got it wrong on trade.
That’s why Labour affirmed many years ago that we will never use aid conditionality to force countries to open their markets to our exports. We need to build new relationships of mutual respect and mutual benefit with our trading partners in Africa, not fall back into damaging patterns from the past.
Exactly the same principle applies to foreign investment into Africa. Progressive policies can help ensure that the countries of Africa benefit from the opportunities of inward investment as they should, rather than feeling that their economic development needs come a distant second in any investment relationship.
We know that too many of the poorest countries have been denied their fair share of the proceeds from extraction of their natural resources by multinational companies. Tax dodging – including transfer pricing in intra-corporate trade – still costs the countries of Africa billions every year in much needed government revenue.
Again, I am proud that Labour pledged in its manifesto to crack down on this abuse, tightening up the transparency requirements on those British territories that have been used as tax havens and ensuring that multinational companies pay their dues like the rest of us.
But we need to go further than this and look at the terms under which foreign investment flows into African states.
Most of the UK’s investment treaties with African countries date back to the 1980s and ‘90s, and are in urgent need of revision.
Labour’s manifesto included the commitment to review these historic investment treaties and ensure they are fit for purpose for the 21st century. That means rebalancing the rights and responsibilities of investors to ensure that host communities can genuinely benefit from the opportunities that foreign investment provides.
In particular, we have affirmed our opposition to investor-state dispute settlement (ISDS) mechanisms in our investment relations with other countries.
Just last week, a Swedish company launched a new ISDS attack on the government of Tanzania over 20,000 hectares of land it had been promised for a sugar cane plantation.
The company is complaining that the Tanzanian government has failed to provide the land to it ‘free of encumbrances’, and it is now claiming compensation through ISDS.
But the ‘encumbrances’ in question are actually 1,300 local farmers who work the land to provide for their families and have been up in arms against what they see as just another European land grab.
Small wonder the South African government has rejected ISDS in its bilateral investment treaties, along with their counterparts in India, Indonesia and many other countries across the world.
There are many other points of Labour trade policy I could mention that are designed to help communities throughout Africa derive the fullest benefit from trade and investment:
• Our commitment to ensuring best practice on labour and human rights in the supply chains of British companies, wherever they operate or source from in the world.
• Checking that our trade agreements with other OECD states do not harm the long-term interests of African economies as a result of preference erosion or trade diversion – and again, it’s thanks to ODI research that we know the full extent of that threat.
• Researching the potential for more flexible rules of origin for exports in the post-Brexit era, so that we can encourage expanded cumulation and value chain formation between African countries.
But let me sum up by speaking to the heart of this APPG’s purpose. Because we need to guard against any suggestion made by Liam Fox and his friends that integration into the global economy will automatically enable the poorest countries to ‘trade their way out of poverty’.
The World Bank’s former research director, Paul Collier, has warned against this in his best-selling book, The Bottom Billion, where he concludes that reliance on trade is “more likely to lock yet more of the bottom-billion countries into the natural resource trap than to save them through export diversification”.
For those of you who know your history, this was precisely the experience of so many peoples under colonial rule in the nineteenth century, when they were integrated into the global economy on terms that were designed not in their interest but squarely in the interest of the imperial powers.
Only if we reset the terms of trade and investment will African countries be able to derive the fullest benefit from the opportunities on offer.
Labour is committed to working in partnership with our African trading partners to make that a reality.